The Cost of Doubling CPP

Barrie McKenna’s appraisal of party positions in the Globe today wrongly assumes that the NDP proposal to double CPP benefits would require a doubling of CPP premiums.

The current combined employee/employer premium rate of just under 10% of covered earnings was set a few years back to make up for a prior period of under funding when CPP operated on a pure PAYGO basis.

The Chief Actuary in the most recent report pegs the go forward rate needed to finance the program at under 6% of covered earnings, much less than the current premium. The go forward rate  is theincrease that would be needed to double the CPP benefit moving forward on a fully pre funded basis, as is required by current legislation.

Former CPP Chief Actuary Bernard Dussault has endorsed the CLC calculation that premiums would have to increase by less than 60% to pay for a doubled benefit.

Under this proposal this increase would be slowly phased in for employers and workers over seven years, and all increased benefits would be fully pre funded.

Expanding the CPP is by far the best deal pension deal available to workers since premiums paid are matched by those of employers, and since the CPP Investment Fund has managed plan assets well at a very low cost compared to the fees charged by financial institutions.

Consider this. A worker would, at age 65,  have to have set aside about $250,000 at current interest rates to buy a lifetime inflation indexed annuity equal to the maximum CPP benefit.

2 comments

  1. On No more tough on crime… Why trouble Mr Harper with the facts, his mind is made up. We are what he makes us appear to be. Such a crazy maker. On the proles…if ever we needed the kids it’s now. And yes the facts re doubling the CPP are very compelling.

  2. We need someone to deal with the rest of the claims in that Globe comparison. What about the “universal consensus” among economists that corporate taxes are the worst way to raise money, for example? It seemed to me that the compilers of the analysis hadn’t been reading the Globe’s own recent headline studies. Or have I not understood?

Join the Discussion

Your email address will not be published. Required fields are marked *

Before commenting, please read our Comment Policy